Forum Tackles Grain Questions

Charlene M. Shupp Espenshade
Special Sections Editor

HARRISBURG, Pa. — The past two years have marked a roller coaster ride for feed and grain prices. From the highest of highs in early 2008 to the dramatic drop that followed, the impact has been significant both for farmers that produce feed grains and those that depend on them.

Pennsylvania Agriculture Secretary Dennis Wolff welcomed feed producers from seven states Wednesday to the Pennsylvania Farm Show Complex to discuss key issues at the first summit organized by the Pennsylvania Feed and Grain Task Force.

Pennsylvania Sen. Mike Brubaker (R-36), chair of the Senate Agriculture and Rural Affairs Committee, said “Agriculture is facing variables that it has never faced before. I don’t know about your crystal ball, but mine is foggy.”

Brubaker said that agriculture needs to figure out how to deal with these variables.

The summit was filled with speakers representing all aspects of the industry, sharing their thoughts on how the shift in feed prices and the global economy is impacting grain markets.

The keynote speaker was Dr. Jerry Bange, chairman of the World Agricultural Outlook Board. He shared insights on where the markets are going for 2009.

Earlier in the morning, the board released its World Agricultural Supply and Demand Estimates (WASDE). Bange shared the report findings to more than 200 farmers and industry representatives.

After this year, his agency predicts that corn, wheat and soybean acreage will stabilize. 2009 will see a reduction in corn acres to 86 million and then rise in later years to about 90 million acres, according to the report. Soybeans will rise in acres to 77 million and then settle back to about 71 million in future years.

Early spring net returns per acre for this year are projected to be lower than in 2008, however Bange said farmers should keep in mind that returns will still be higher than 2006. Also, corn is expected to bring in a higher return per acre compared to soybeans in 2009.

The report bumped the 2009 average corn price back up to $4.10 per bushel. Bange noted that farmers are “being more cautious” this year about when they will sell.

Ethanol production is just now reaching prices that make it profitable to produce again. High corn prices, combined with lower gasoline prices, made it unaffordable last year and plants lost money. Several went idle, even bankrupted, or reduced production in 2008. The report bumped up ethanol use prediction as the industry begins to respond.

Bange also noted that this could be the last year for an increase in corn ethanol production as the country approaches its corn ethanol production cap. Then ethanol demand will begin to stabilize.

Average price for soybeans this year is predicted to be $9.35 per bushel. What will drive prices, Bange said, will depend on what happens to stocks.

While overall exports have declined, shipments to China remain strong, he pointed out.

Biodiesel from soybeans has not been able to capture growth as corn ethanol has. When soybean prices were on the rise, Bange said, biodiesel plants looked to other resources, such as cooking oil waste to meet their needs.

Bange noted these key upcoming USDA report releases:
• March 31, NASS Prospective Plantings Report;
• April 9, WASDE updated 2008-2009 forecasts; and
• May 12, WASDE updated 2008-2009 forecasts plus first “official” 2009-2010 forecasts.

Livestock, Dairy Sectors
Set for Tough Year
Because of the higher production costs, Bange said, there will be a 2-percent decline across all species in the livestock and dairy sectors. This is compounded by the current economic situation as people change their buying habits. Broiler prices will hold because consumers are moving to chicken as a cheaper priced protein source. On the export side, for the first time since 2004, poultry and red meat exports are expected to decline.

Dairy losses have been “enormous,” Bange said, with losses averaging 30 percent across products, with the exception of butter at 19 percent. The price difference for all milk has dropped from $18.32 per hundredweight to an average of $11.55 per hundredweight, an estimated 37 percent decline.

That feed milk price ratio is at 1.5. When the ratio is below 2, profitability becomes difficult.

“It’s not a happy situation for milk producers,” Bange said.